What will Indians do for jewelry amid high gold prices, answers agency

In FY24, gold prices rose by around 14 percent. Prices are now about 19 percent higher than the FY24 average. Would higher prices deter consumers from buying gold jewelry?

ICRA says consumers should remain vigilant

A note from ratings agency ICRA said domestic consumption of jewelery, in value terms, is likely to moderate to 6-8 per cent by 2024-25 due to high prices. This will be a sharp moderation from 18 percent in 2023-2024.

Gold jewelery sales volume is likely to contract this year, compared to 2 percent in FY23 and 4 percent in FY24.

“Consumers are expected to continue to monitor price movements and adjust to the new price levels for two to three quarters,” the report said.

“Given high gold prices, ICRA expects the share of recycled gold in total supply to continue to increase and increase by 400-600 basis points in FY25.”

Sujoy Saha, vice-president and sector head at ICRA, said sales growth of the sample of 15 major jewelers, representing 75 percent of the organized market, is likely to moderate to mid to high single digits. in FY25. These jewelers registered a growth of 16 percent in FY24.

According to Saha, this could be due to subdued consumer confidence and high gold prices, despite robust store expansion plans and structural tailwinds. “Demand for weddings and celebrations is likely to be relatively subdued amid a relatively lower number of auspicious days in FY25,” he said.

Shop additions to continue

ICRA also said that the number of stores of the 15 companies increased by 21 percent in FY24 after a 20 percent increase in FY23. This came as major retailers pursued aggressive store expansions in recent years to gain market share, with customer preferences shifting towards organized players.

This will probably continue this year.

“Store expansions are also likely to continue in the short to medium term, although players will remain vigilant of consumer sentiments,” Saha said.

First print: June 18, 2024 | 1:21 p.m IST